Jefferson Review

"Your Liberty is Our Interest"

Home /  Archives / Links / Quotes / Book Reviews / Advertise /Contact us / Subscribe / Calendar

The pinch of prevailing wage

By Jim Waters

Critics of Kentucky’s prevailing-wage law claim the practice is a harmful relic from the past that keeps schools from getting built, places some contractors at a competitive disadvantage and generally rips off taxpayers. Supporters assert that the policy gives contractors incentives to hire better workers, which, in turn, erect higher-quality buildings.

Something both sides will generally – and rightly – agree upon is that the commonwealth’s prevailing-wage law results in public projects that cost more than if built using market wages for labor.

Defenders of the policy who claim otherwise place themselves in a logical quandary by boasting about how prevailing-wage stipulations produce bigger paychecks for workers but don’t contribute significantly to increasing the cost of public projects. Among these folks, “common sense,” as Horace Greeley said, “is very uncommon.”

The mountain of evidence against their misinformed positions is nearly as high as the Department of Labor’s stack of paperwork detailing contractors’ supposed violations of the policy.

‘While there should always be debate over whether costly projects are needed, there can be no argument that prevailing-wage laws drive up the cost of constructing new schools.’        

Some of that evidence comes from Frankfort itself, where the Kentucky Department of Education (KDE) estimated that prevailing-wage regulations increase the cost of building schools by around 11 percent. According to the KDE, the state spent $496 million on education projects in 2003, more than $44 million of which was due strictly to prevailing-wage requirements.

There’s certainly justification for debating whether these projects are needed. But the fact is there are many obsolete – and deteriorating – facilities in Kentucky’s 176 public-school districts. State budget director Brad Cowgill told the House Labor and Industry Committee earlier this year that some teachers will have to teach and students will have to sit in “crumbling schools” because of the state’s prevailing-wage requirements.

“Any policy that frustrates our objective of replacing those obsolete buildings is a policy that competes directly with one of our most important objectives, which is to empower our children with higher opportunities,” Cowgill said.

While there should always be debate over whether costly projects are needed, there can be no argument that prevailing-wage laws drive up the cost of constructing new schools.

Plus, if you talk to school superintendents, you will find little support for claims by prevailing-wage supporters that the policy results in higher construction quality. According to the LRC, 96 percent of Kentucky’s 176 school superintendents answered “no” when asked if the increased costs incurred by prevailing wage resulted in discernible higher quality.

Besides, how is it that contractors build quality office complexes, large custom homes, investment properties and corporate facilities without being coerced by some kind of forced wage policy? These contractors don’t even have to be told the quantity and quality of people to hire to accomplish a task!

Along with delays on projects, which naturally drive up construction expenditures when the price of materials, machinery and land increases, the manipulation of wages in certain regions of the state also contributes to significantly higher costs.

For example, a few years ago, plans for a new justice center in Johnson County were approved at an estimated cost of $7.5 million. However, the county ran into some problems acquiring the property and was forced to delay the construction-bidding process for two years.

During the delay, the state’s labor department re-evaluated the county’s prevailing-wage rates. When the county was finally ready to accept bids in 2003, officials were shocked to discover that the facility’s new estimated price tag was nearly $9.3 million. The price of the justice center had risen nearly 20 percent before a single criminal had been transported from there and incarcerated in a jail that probably also cost more to build as a result of prevailing-wage demands.

When representatives from the Administrative Office of the Courts (AOC) went to Frankfort in November 2003 to identify funding necessary to complete the Johnson County project, lawmakers were curious about the steep increase in estimated cost in just two years.

AOC representative Garlan Vanhook told the Capital Projects and Bond Oversight Committee that the hourly base rate for a hod carrier had swollen from $8 an hour in 2001 to a whopping $20.41 the very next year. During the same period of time, however, the rate for a bricklayer remained at $12.

Prevailing-wage supporters who claim the policy increases the quality of a project could also find themselves in a logical quandary here. How can any policy remain untouched that dramatically increases the wages of the unskilled hod carrier – who carries the brick and mortar – while denying any increase for the skilled bricklayer, the one to whom the carrier brings his heavy load?

Bricklayers aren’t the only ones carrying a heavy load as a result of the state’s prevailing-wage policy. It’s breaking the backs of teachers, students and taxpayers, too.

– Jim Waters is director of policy and communications for the Bluegrass Institute, Kentucky’s free-market think tank.

The Bluegrass Institute is an independent research and educational institution offering free-market solutions to Kentucky's most pressing problems.

Weather (Louisville) / Mapquest /  White Pages / Business Search / CNN / Dictionary / E-card / MSN